Is It Ever Too Late To Catch Up on Retirement Savings?

The best time to start saving for retirement is decades before you actually plan to retire — like the moment you enter the workforce full time.

Getting an early start has a couple of big advantages. First, you devote more years to contributing to your retirement fund. And second, you can use the power of compounding to accelerate the fund’s growth.

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But is it ever too late to catch up on retirement savings? GOBankingRates asked a financial and retirement expert that question. Here’s what you should know.

Also see the “ideal” age to start saving for retirement — and what to do if you’re late.

Beware of the Closing Window

No matter how old you are, it’s “rarely” too late to improve your retirement plan, according to Nancy Gates, lead educator and financial coach at Boldin, a financial planning platform that helps you strategize a retirement plan.

That doesn’t mean you have all the time in the world, though.

“There is a point where building a sufficient nest egg through savings alone becomes significantly more challenging, and that window begins to close,” Gates told GOBankingRates.

The urgency to save enough for retirement increases once you hit your mid-to-late 50s, she said. This is partly because your retirement might be less than a decade away and partly because compounding has less time to take effect.

If you hit your mid-50s without building a sufficient nest egg, it’s time to speed up your retirement savings.

“Even when people are in their early 60s, aggressive saving can still be beneficial,” Gates said. “However, achieving a nest egg large enough to fully fund retirement may require additional strategies such as reducing expenses, delaying retirement or downsizing.”

Learn More: I’m a Wealth Coach: 4 Ways To Build a Resilient Retirement Portfolio in 2025

Why You Shouldn’t Wait Too Long

There are several negative consequences of waiting too long to build retirement savings. In addition to missing out on the compounding effect, here are three others cited by Gates:

Overdependence on Social Security: Social Security isn’t designed to fully replace your income and typically supports only 30% to 40% of a retiree’s budget, Gates said. Relying too heavily on Social Security in retirement can lead to a number of financial problems. Reduced lifestyle options: Starting too late to save for retirement can hinder your ability to achieve your desired lifestyle, which in turn can lead to “compromises” in areas such as travel, hobbies, family support and charitable contributions. It could also limit your housing options. More stress, less flexibility: Delaying your retirement savings leads to a “smaller financial safety net,” Gates said, and increases your exposure to financial risks such as market downturns and unforeseen health expenses.

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What To Do Now

If you’re way behind on your retirement savings goals, Gates recommended using any free cash flow to boost those savings. You should also make catch-up contributions to your 401(k), IRA and health savings accounts.

Here are some other options to consider.

Work longer to keep building up your retirement accounts. Delay claiming Social Security retirement benefits well beyond the earliest eligibility age of 62 years old. Move to a smaller, more affordable home and/or location and put the extra money toward retirement savings. Develop a “clear spending plan” that separates essential and discretionary expenses.

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This article originally appeared on GOBankingRates.com: Is It Ever Too Late To Catch Up on Retirement Savings?

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